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January 30, 2022

MarketMap-2022 Issue#5

MarketMap-2022 Issue#5

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January 29, 2022

Volatility Reports 1/31/22

The frantic chatter from the public stream is misguided and uncertain.

All talk about panic and wash out and the market meeting expectations that every expert advanced for a 10 to 20% decline seems to be the majority view of the professional advisor/content provider. The problem is the so-called “correction” has no signs of a correction. That is it looks and feels just like a BTFD event and 99% in line with all the previous dips of 2021.  But no signs of a correction, no long bar day decline that exceeded 3 ½%.

There is some confusion that a few believe will be sorted out by the bulls, back to “how the markets are supposed to work.”

I hear that it just can’t be that crude oil is making a seven-year high while some of the grains are coming back real strong all in the face of a strong U.S. dollar and the weakness of other currencies. This is not normal, they are saying.

How can that happen when

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January 28, 2022

Volatility Reports 1/28/22

Nearly everyone has jumped on the idea of an S&P washed out and the idea sentiment of the everyday investor at extreme bearish readings, they say,  has got to be bullish.

When it comes to contrary thinking, the old school looks at what they have been told is the public who is hard-wired to lose 90% of the time. Yea that is old school TA, goes back to monitoring the “odd lotter’s” back in the 1920 and 1930s. The inference was dumb money because they were too poor to buy a round lot, 100 shares of stock. Hell, today they pander to the people to buy fractional shares.

Well, the point is that it was genius on Wall Street who told me he looked for a wave of consensus among the professionals, the advisors, the wirehouses, and today the instantaneous internet market experts.

While surveys of little bitty old people are fine for the people that use them, the actions of the traders, capital managers, and hedgers tell a story of

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January 26, 2022

Volatility Reports 1/26/22

“Do not wait until the conditions are perfect to begin. Beginning makes the conditions perfect.”

Two of the most profitable patterns chart watchers can come across are the irregular top and the extended fifth. They are rare but worth the wait. They are unorthodox from an EWT point of view because its the third wave that is normally extended and tops normally finish on a five wave structure

Irregular is a new high like the one shown on the Glamor/value ratio chart inserted below where point (B) was achieved on an A-B-C advance as opposed to a motive wave, five-segment structure.

It is also worth repeating TEM’s monthly charts revealing where panic buying began, which is where the market’s risk level is and

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January 25, 2022

MarketMap-2022 Issue#4a

MarketMap-2022 Change of Trend Dates US Averages

From the table of change of trend dates, and the building of the Map for 2022, the scenario calls for a continuation of the intermediate-term decline into a semi-climatic low, an I-T low on or about

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January 24, 2022

MarketMap-2022 Issue#4

MarketMap-2022 Change of Trend Dates.
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January 24, 2022

Volatility Reports 1/24/22

Hey Easy Money!

“Easy come, easy go.”

The Perma bulls are slowly flipping to a cautious point of view, while the majority is referring to the decline as a correction. The decline has shown no signs that it is a correction in an ongoing bull market to date.

Here is a stat that is well known in the industry, one I would not hang large investments or hedges on. Rather the sentiment coming from the bullish side of the talking heads is more noteworthy.

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January 18, 2022

Volatility Reports 1/19/22

“Here Comes A Revolution!” – Saxo Bank Unveils Its ‘Outrageous Predictions’ For The Year Ahead

Time headline 1/3/2022 “Half the U.S. Believes Another Civil War Is Likely”

“Expert predicts potential US civil war, fall of democracy
A political expert has made a horrifying prediction about the future of the US with 2024 being the breaking point.” News.Com.AU
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January 16, 2022

MarketMap2022 Issue #3 EBCs

A “bear market” is a decline of more than 20%. Preceded by a bull market of more than 20%.

The “New School of Technical Analysis” has moved beyond arbitrary definitions.
MarketMap-2022 Scenario Planner will focus on similar expectations based on peaks with near-identical tidal extremes during the same seasonal period.

The seasonal bracket is the best fit for Dow Jones Industrial peaks from

December 11 to January 15.

Bull market peaks that occur in December or January produce a seasonal pattern that repeats itself. Seasonal patterns, for example, similar intervals from top to a panic low. Plus, they produce two long bar declines that occur at a fixed interval as well. These mid-winter seasonal peaks have also been followed by geopolitical events that have caused financial distress in the markets. This latter point is critical as the market does not anticipate national security events well.

The tops in 1961, 1973, 2000, are prime examples. These seasonal tops marked the beginning of severe bear markets. What is more than a coincidence, worldly events followed each with security threats in mid-October during the year ( 12 months following ) of the high pivot. What is even more striking is another political or national security event that occurs in August to November of the ensuing year 1962, 1974, and 2001, respectively. 2018 was only a correction and an exception.

I feel this is essential to know because literally, no one is pointing to geopolitical risk here that would cause any financial distress.  Beyond the obvious listed previously: Russia Invaded Ukraine; China/Taiwan Conflict; the USA takes military action against Iran; and a major cyber attack upon the USA or its Allies.

Since 2018, the potential national security threat is a constitutional crisis in the USA with parallel right-wing terrorist attacks. This is nothing I am promoting, I am not attempting to persuade anyone into this probability, it is a warning that only a few are considering.

To get the full printable report in PDF format signup here and access immediately.

 

 

Here are the four seasonal examples of bull market peaks in the winter season. 

This table shows similar peaks to low intervals in the following three primary scenarios, with 2018 being an example of a correction.

The top tick occurred on December 13, 1961

This peak preceded a decline over five months to a panic week in late May followed by another panic week in late June 1962. The market action that day May 28, 1962, was an AOD of 6.6% followed by a test and break of that low into another panic low on June 22, 1962. Two keys here, May runs a close second over the history of the NYSE and before as a month of panics. The other is the six-month interval from peak to panic low.

The decline from the 12/13/61 high took 25 weeks into the June price low. Along the way, the first long bar decline day was 4/13/1962, about 4 months after the high pivot. As such it signaled a bear market was unfolding, and on that day the market broke under the 5% band suggesting that institutional types should begin to sell.

Long bar days do not happen near market highs when bear markets begin, full stop. They happen to shake out weak hands during a correction of a bull trend.

The bigger suggestion here is for aggressive hedging to be engaged as volatility increases (VX), counting into a COT to anticipate when long bar reversals should begin. From the first long bar day – mini panic at 90* degrees, it is six and seven days into the next AOD declines of 5% and 6.6%. On day 8 a long bar advance followed from open to close up 10%.

The decline within that short two-day period had reached two times the 5%  big boy bands, a good time to trade for a one-day wonder reversal and 8 days or 1/4 of the cycle.

That AOD advance was 10%. If you are hearing seven days often, that is because it is the 7-day cycle we are taking advantage of. It is 1/4 cycle or 7.38265 and 1/8 of a cycle 3.691325 days.

Furthering the illustration, eight days from the near-term high on 6/1/62 the decline ended in a mini panic day of 7%.  Three days after that mini-panic low the Dow staged another one-day advance of 7%.  At that point, the volatility ended. That low was tested by the Russian Missle Crisis in October and a long bar decline of 5%.

Nifty Fifty top 1973

At the time this was the largest bear market since the 1929 crash. From January 11, 1973, to December 9, 1974. It was the lowest volatility bear market in history, doing as much damage to share values in terms of time as well as price action without providing any great tradable moves until the August to October 20% recovery.

The DJIA record high on January 11, 1973, was followed by a protracted and severe bear market. On October 17, 1973, Arab nations imposed an oil embargo on those countries supporting Israel in the Arab-Israeli war. Fears of a global recession spread throughout world financial markets. Further declines accompanied the impeachment and resignation of President Nixon in the summer of 1974 until a final bottom low in October/ December 1974.

The key repetition here is a geopolitical event effectuating the year of the early winter peak followed by another national security or political event manifesting the year following.

Along the way, there were no mini panic days or one-day wounders to speak of except the mini panic in late August, which should be a takeaway for students of the market. Panic days, long bar days that happen over 4 months after the peak, are a signal of a reversal not the beginning of a landslide. In this case, it was a leading sign for an I-T correction of the bear market.

NB: An insight from the above table is the strong tendency of the market to be weak into June +/-  fitting the overlay charts from the previous issues. Based on the counts for 1961 and 1973 suspect a tradable low 7/16/2022 +/- provides a bracket of 6/21/2022 and 8/15/2022.  Also, if the market is in a hurry a mini climax can be projected with a 1/4 cycle to 2/26/2022, which is within the historical realm of a bear market, not a correction. Lastly, October for a change looks like it will be a real jinx month, nothing to simply pay lip service to. 

The Internet or dot-com bubble

In 2000 the Dow made its high pivot on January 14. Nine months later, just like ‘61 and ’73, in October, a suicide bomber attacked the USS Cole in Aden harbor (Yemen), resulting in 17 deaths and dozens of injuries. The terror event caused investor panic, with the DJIA declining by -3.64%. The AOD date was Thursday, October 12, 2000.

2018 was the Perfect Market Bubble following the lowest volatility year in history.

Based on this seasonal pattern, the peak in 2018 was outside the seasonal breaker. Market Map-2018 along with its other tools on the 18th of January gave an “off risk” signal. In other words, raise cash. We also engaged our hedging robots on TradeStation.

At that time MarketMap concluded that ” it (the ATH) will be followed by a series of Annual size One Day declines culminating on August 8 and October 19 with panic days caused by national security threats. That is roughly Contrary to Thinker’s outlook as of this issue #3. However, based on the working assumption that the next 18 months will be a bear market, there will NOT be any long bar days until the market moves further away from its ATH.  That information will be shared as the dates become closer.

While CT was right in calling the peak, the panic set in too early telling smart investors that the decline was only a correction. So its pattern would not fit with the three seasonal peaks layout above. Yet,  just like the three where there was an event in October that lead to climactic action, on 2 October 2018, Jamal Khashoggi, a US-based journalist and critic of Saudi Arabia’s government, walked into the Saudi consulate in Istanbul, where he was murdered.

An event that could have had a ripple effect with a different geopolitical background.

To date it is not talked about after months of conflicting narratives emerged over how he died, what happened to his remains, and who was responsible.

The first two trading sessions of 2022 January 3 and 4 were rally days, which starts the year in model form. Thus far Dow & Co is running alongside the scenario planner’s best fit.

But not perfect, but confident thus far.  The only variance is the placement of the high in the tidal cycle.

All of the highs shown above, and the peaks not shown made their high pivots near the first quarter of the lunar or tidal cycle, which is at 90* (degrees.) The peak on December 3, 1886, hit 91*, before a bear market; and the counter-trend peak in 2009 on January 2, 2009, hit 68* degrees, preceding a decline of 29%.

The chart shown here reflects the high that came in near the full or completed cycle of 360* degrees, at 24*.

That is 1/4 of a cycle away from having 100% commonality with the high pivots outlined above.  The 2022 secondary high happened at 120 degrees, which was a hotspot in retrospect. More on that in the coming issues. This does not preclude a primary peak from being in place or the pattern of the bear market unfolding in line with the history outlined above.

One thing to keep in mind is on previous occasions when the market’s high pivots occurred at the end of the 28 1/2 day cycle (aka the beginning of the 28 1/2 day cycle ) it has been followed by massive bear markets and panics.  Here are three historical examples: The top Sep 05, 1899, is ranked number five as one of the worse. The panic hit on December 18th, 1899. Amidst a series of banking panics, the Dow Jones Industrial Average – newly created in 1897 – crashed by 8.7% in a single day, the largest drop in the 19th century.

Two other highly recognizable bears peaked at zero degrees, on September 03, 1929, and the peak on August 25, 1987, was at 13* degrees.

Scenario Map to Date

Seen here is the first draft of the annual map. It suggests an ATH on the 4th by the Dow and the market’s trend should continue lower into February 17th +/- a day.  Since the shortest dominant cycle is 28 1/2 days, from COT to COT, the cycle low expected January 20 +/- will only lead to a quarter cycle (minor) recovery. Volatility Reports will assist with the dynamics of that.

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Country Thinking is about letting go of traditional ways of thinking, the commonplace that no longer serves you well in investing and trading. Building from the truth, from first principles the robust into anti-fragile. Thanks in advance for your consideration, I look ahead to working with you for the duration.

Great and Many Thanks

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2022

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January 11, 2022

Volatility Reports 1/11/22

The Santa Claus Rally is Melting Away.

Since the spring of 2021, it seemed like everyone was waiting for the rush to value stocks. Well after a whip-saw double top the flow of funds into value shares vs the glamour growth stocks is here.

The first chart is the ratio between the two indices.

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